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171 171 BUSINESS REVIEW Vo l. 61. No. 4 March. March. 2014 How to Balance the Intellectual Property Conflic t: a Case Study of J apanese Pharmaceutical Companies in Emerging Countries YuJn-r-mw XMum 一明 MPν νゎ J'ιY Abstract Abstract Pharmaceutical companies entering emerging countries wiU face intellectual property property conflicts due to issues relating to thc access to medicines of consumcrs in those countnes. “Intellectual property conflic t" refers to the conflict of intercst which exists between manufacturers ,who own intellectual property , and consumers ,who do no t. In In reviewing the representative literature , there is a focus on the pricing patterns (known as differential pricing) of pharmaceuticals. This is a way of setting different prices for the the same products in different areas or countries , in particular setting a low price for low- income income consumers. while at the same time maintaining the pharmaceutical companies' profits by granting patents. In In spite of the growing literature on differential pricing , research in the field of corporate corporate behavior reviewed has been relatively lcss dctailed. This paper explores the issue issue from a corporate perspective , by examining four R&D-driven PCs in J apan: Takeda Pharmaceutical Pharmaceutical Company Limited (Takeda) , Daiichi Sankyo Company Limited (Daiichi Sankyo) ,Eisai Co. ,L TD (E isai) and Astellas Pharma Inc. (Astellas) , mainly through the use of of quantitative data as a means to determine key financial indicators during the period 20 ∞- 2013 2013 reviewed 172 172 一一- BUSINESS REVIEW -一一 Keywords: Intellectual Property (IP) ,Intellectual Property Conflict (IP Conflict) ,Paten t, Pharmaceutical Pharmaceutical Companies (PCs) ,Emerging Countries , Access to Medicines 1. 1. Introduction As pharmaceutical markets in developed countries , induding Japan ,America and Europe mature ,attention has tumed to ・pharmerging markets'.l Pharmaceutical companies (hereafter , PCs) have carried out their business in the markets of developed countries , mainly in in Japan ,America and Europe during the past decades. However , because of the falling birthrate birthrate and depopulation ,and rising medical expenses , the govemments in developed countries countries took action to curb medical expenses. especially through promoting generic drugs. In In addition ,many PCs lost their revenues in developed countries because of the impact of of top-selling products losing their patent protection. At the same time , the markets in emerging countries (巴 merging markets) were growing. The emerging market will reach 28 percent percent of global spending by 2016 ,compared with 4.8 percent in 2004 , as population and economic growth contribute to a dramatically higher use of medicines in these markets. Moreover , the CAGR of pharmaceuticals markets during the period 2013-2017 is expected to ・. be 14-17 percent in emerging countries ,compared to 3-5 percent in developed countries. 2 In shor t, this tendency indicates that the contribution of revenues from developed markets is much less than from emerging markets ,and emerging markets have become more attractive to to PCs. On the other hand ,PCs which are entering emerging countries will face serious problems , such as intellectual property confiicts due to access to medicines and govemment regulation regulation related to 出IS. ‘Access to medicines' means the problem of low-income consumers who cannot afford the drug prices for their treatmen t. The main issue surrounding access to to medicines is high drug prices. However ,why is it that the same pricing does not cause problems of access to medicines in developed markets? One reason for this may be the The phrase ・pharmerging marke t' stands for pharm( 即日utica l) +(em)erging. That is ,emerging markets targeted targeted by pharmaceutical compan 児 s. Generally , the pharmaceutical mark 巴ts in emerging countries are seen as as pharmerging markets ,like China ,Russia ,Brazil and India 2 Source: IMS Health httD:/ httD:/ /www .i mshealth.com/deDlovedfiles/ims/GloballContent/lns I! lhts/Medicines Outlook Through 2016 Report.pdf Report.pdf (Accessed on 5 Dec. 2013) How How to Balance the Intellectual Property Confiict a Case Study 01 )apanese Pharmaceutical Companies in Emergmg Countries 一一一 173 fact fact that medical insurance systems in emerging countries have not been fully developed Because of these deficient medical In surance systems. copayment for consumers in emerging countries countries will be higher than that for consumers in developed countries. 、Moreover. some consumers in some emerging countries have to pay the full cost of medicines. In spite of rapid rapid economic growth in emerging countries. among the population there remains a large proportion proportion of low-income households I (for instance. the proportion of low-income households in in China accounted for 49 .4 percent of total population in 2010' ). The amount of copayment will will become a burden for low-income citizens. thus causing the issue of access to medicines. To solve this issue. governments in emerging markets have introduced some policies. policies. such as the issuing of compulsory licensing to manufacture products (usually called generic generic products). which are provided at a low price to consumers. Compulsory licensing is is a form of authorization. whereby governments allow someone else to produce patented products products or processes without the consent of thc patent owner under the TRIPS (Trade 甲 Rc!ated Rc!ated Aspects of Intellectua! Property Rights) Agreemen t. Compu!sory !icensing will not benefit benefit PCs. because they earn less than in the situation before the issuing of compu!sory !icensing. !icensing. Under the scheme of compu!sory licensing. PCs only earn a profit of 0.5% of sales. based on the pricing of the gencric products (Tsuruhara. 2007. p.43.)" In In these circumstances. what path will companies take? It seems tha t. for PCs who want to run their business smoothly in emerging markets. it will depend on whether they they address the issue of access to medicines vo!untarily. thereby eliminating the potential for for compu!sory licensing; that is. whether they offer medicines at a low price voluntarily. However. as pharmaceutica!s require huge R&D costs. it seems tha t. by setting low prices. it would be difficult to recover costs and repay investors How much cost is invested in deve!oping a new type of medicine? It takes an enormous amount of time and money to develop one new drug. It takes an average of 10- 15 15 years to develop a new medicine. from the earliest stages of discovery to the time it is γhe average copayment for consumers in developed countries is 7-13 percen t. compared with 50 ・100 percent percent m emergmg countnes I According to White Paper on International Economy and Trade (2010). low-income household refers to annual annual disposal income of less than US $5.000 Source: Source: Websitc of Ministry of Economy. Trade and Industry. http://www.met i. go.jp/report/ tsuhaku2011/2011honbun_p/201 tsuhaku2011/2011honbun_p/201 L03- l. pdf(Accessed on December 1ぺ2013) " ror more examples of compulsory licensing please sec thc Website 01 the ]apanese Patent 0 世ice: httD:! httD:! /WWW.iDO.go.i ロノ shirvou/toushin/chousa/odfltrioschousahoukoku I2 4 1.odf 174 174 一一一 BUSINESS REVIEW- 一一 available available for treating patients. The average cost is estimated to be $800 million to $1 billion.' Even though pharmaceutic aJ s require huge R&D costs. PCs have to consider the background to to people's needs or the introduction of low-priced drugs to solve the issue of access to medicines medicines (the relationship between access to medicines and IP will be described later) if they they want to enter the emerging markets. Therefore ,this paper considers some schemes that might be able to balance the IP IP confiict due to problems of access to medicines , using a case study from the companies' perspective. perspective. 'Schemes for balancing IP co 凶 icts' means considering how PCs could benefit under under the conditions of low pricing , in order to solve the problem of access to medicines due to to IP confiicts. The paper is structured as follows: Section 2 provides a definition of “intellectu aJ property" property" (IP) ,and describes what IP conflicts are (the relationship between access to medicines medicines and IP). Section 3 reviews and analyzes the theoretic aJ literature about IP confiicts. Section Section 4 discusses a methodology to interpret the data available. Section 5 presents some empirical empirical findings regarding studies of pharmaceutical manufacturers 目 Section 6 provides some tentative conclusions. 2. 2. Concepts of intellectual prope 吋y and intellectual prope 同y conflict 2.1 2.1 The concept of intellectual property The World Intellectual Property Organization (WIPO) detines “intellectual property" (I P) as creations of the mind ,including inventions ,literary and artistic works , and symbols , names ,images ,and designs used in commerce. It is a wide ranging definition. In practice , the the definition of IP may be limited and varies according to different research outcomes and viewpoints. viewpoints. For instance ,Ghaur i. Pervez N. , and Rao , P. M. (2009) refers to IP as technology- based based intangible assets ,from the perspective of the IT industry. For the purposes of this paper , the term "intellectual property" (IP) refers to a valued valued part of a creation of the mind ,which would be able to generate profit for the given company. company. It divides into two types: one is protected by IPRs (intellectual property rights) , such such as patents ,copyrigh t. and so on; the other is not protected by IP R, such as ideas or urce: So urce: Website of PhRMA htto:/ htto:/ /www.ohrma.orll/sites/defaul t! files/.../rd brochure 022307.od t (Accessed on September 19'1'.2013) 一一一 How to Balance 版In tellecrual Property ConfiicL a Case Study of Japanese Pharmaceutical Co mpanies in Emerging Countries 一一一 175 designs designs for a new produc t.